From the very first step of data collection all the way to payment, the quality speed of your Accounts Payable (AP) process during each step in the workflow has a direct impact on the profitability and success of your business. Understanding why - and how - the process works can help ensure that you reap the benefits of efficiency. In fact, having this level of insight is the very basis of the argument for Automated Invoice Processing itself.
What is Accounts Payable?
First, you need to understand the importance of the AP process beyond getting invoices into and through the system, then paid on time. While that is of course the most fundamental purpose to the AP department, the process is central to business operations for multiple reasons.
A direct effect on supplier/vendor relationship management.
When everybody is paid on time it is easier to gain favorable payment terms and discounts or, in the case of emergency, the ability to ask for an exception.
- Source of information
Ensuring accurate information is essential to producing an accurate balance sheet, providing complete answers in the case of audit, helping to prevent errors and fraud, and giving management strategic insight into the company.
- Determines an organization's cash flow
If you don't pay for the goods then you won't receive them. No goods means no sales, no revenue, and eventually no company.
The bottom line? It is definitely worth ensuring that the AP process runs at optimum levels by whatever approach necessary.
What is the AP process?
At the most basic level, the basic Accounts Payable process goes like this: an invoice is received. The invoice data is entered, then confirmed against the Purchase Order (PO) and relevant General Ledger (GL) accounts. The information is routed for approval and once approved, is scheduled for payment then paid.
It sounds really simple so what could go wrong?
For many companies, the invoice is still being received by the AP team in some non-electronic form, such as by mail or in the case of multiple location businesses by boxed shipment. The resulting mounds of paperwork have to be received, then entered and checked by hand; a tedious, repetitive process that moves slowly and provides an easy opportunity for mistakes to happen. The amount of time it can take for approval depends on the designated approver's location and availability. A check will need to be cut then sent. All that paperwork then needs to be transported to storage and filed for years. All in all a time consuming process that only takes longer and costs more the larger the company.
Why automate the AP process?
The solution to efficient Accounts Payable process and streamlining the way of invoicing is automation; eliminating manual tasks and reducing processing time while saving money and improving the cash flow. Best of all, the new dynamic workflow tracks each step of the process in real time. Let's examine just a few of the immediate benefits of implementing a cloud-based system:
Automating the AP workflow means a faster payment cycle, literally from weeks and months to hours and days. Digitalization means that the information moves at lightning speed to any location with an internet connection, so delays are eliminated throughout intake, approval, and even payment.
Using technology means eliminating paper-based costs such as transporting, filing, data entry, and more. The software operates without supervision 24/7 so an increase in workload doesn't have the same effect as the appearance of mountains of paperwork. Timely tracking and payment also means that businesses can move away from late payments and penalties to early payment discounts and benefits. Finally, thanks to the cloud, a business can choose to only pay for what they need and expand as necessary. No physical equipment to purchase and maintain, no contracts that can't be modified as needed.
Modern automation involves an electronic scanning ability known as Optical Character Recognition (OCR) and 3-way verification to ensure that when the invoice enters the system the information matches. This immediately reduces the chance for error or fraud which in turn eliminates unnecessary delays further along the workflow.
An automated AP process will also leave a data trail, meaning that you can trace everything that occurred at each step in the invoice workflow. Management will always be able to monitor important metrics, keep track of important business information, and as a result make better strategic decisions. Thanks to the cloud, this data is always available at the touch of your fingertips through a web-like search and can be done from anywhere at any time.
While time, money, and accuracy are certainly reasons enough to ensure efficiency through automation, staying in compliance with the Making Tax Digital (MTD) and e-invoicing regulations is in itself reason enough.
What does this all mean?
With the dramatic changes that continue to occur in the economy - pandemic, remote work environments, changing regulations, increase in fraud attempts, and more - now is the perfect time to seriously consider automation if you aren't already there!